J. Lee Nicholson

[7] Nicholson had started his career at the Keystone Bridge Company, where he worked his way up from office boy to assistant at the engineering department.

In the summer of 1917 he was chairman of a conference of delegates from the War, Navy, and Commerce Departments, the Federal Trade Commission, and the Council of National Defense.

His main contribution was to organize, improve, and propagate this new knowledge as it spread from a tiny minority of pioneering firms to the vast majority of manufacturers who still had no formal cost accounting systems at the beginning of the twentieth century.

Nicholson hoped that the Public Accountant, Systematizer, and Cost Clerk would find this work to be of value as a reference in planning, devising, or changing a factory system.

Under this head the author points out the general relation of wage systems to costs, treating of the pay-rate-system, piece work and the differential rate plan, as well as profit-sharing and stock-distribution.

While undoubtedly a number of these forms or similar ones are to be found in ordinary treatises, nevertheless a good many, if not the majority of them, are original and have evidently been taken from actual experience.

The biggest part of Nicholson in Factory Organization and Costs, is devoted the description of a control system of operations, which relies on a series of forms, and accompanying procedures.

Nicholson explained: CHAPTERS VII to XXXI, inclusive, are devoted to the explanation and illustration of the various forms which may be introduced in a manufacturing business.

He argued, that "the clerk hire generally necessary in the office of a large plant acts as a dead weight on the profits, and any device which promises to lighten this burden on the cost of production is at least worth careful consideration.

Richard T. Dana (1876–1928) and Halbert Powers Gillette devoted a substantial part of their (1909) Construction Cost Keeping and Management to the description of numerous office appliances.

Mr. Nicholson also recommends, in this book, a method for estimating cost of sales at current prices which foreshadowed LIFO accounting.

[36] Previts (1974) shared Nicholson among the foremost pioneers of interest costs, with William Morse Cole, John R. Wildman, DR Scott, D. C. Eggleston, Thomas H. Sanders and G. Charter Harrison.

But, they say, if these charges are to be made at all, the logical procedure would be to distribute among the factory products the normal return on all the capital invested, not that on the fixed assets only.

For they say: "The use of interest charges in cost accounts on anything like a rational basis is a procedure which faces almost insurmountable practical obstacles.

According to Gerald Berk (1997) Nicholson was part of a group of "associationalists", which promoted the idea that "uniform cost accounting, not enforcement, was the best hope to channel competition away from cut throat pricing into product and manufacturing process improvement.

The general idea for manufacturers was, that "the more they would think systematically about 'planning, routing, and scheduling' conversion processes within the firm... the more they [would] understood about the cost of the many products they made, the more they could distinguish the profitable from the unprofitable.

The objectives of estimate-cost accounting... were to assure proper profit for the products sold and to test their manufacturing costs in detail.

[14] A total of 37 accountants attended the meeting, and among them were practitioners as William B. Castenholz, Stephen Gilman, Harry Dudley Greeley, and Clinton H. Scovell and professor of accounting Edward P. Moxey Jr. A total of 97 charter members joined in the initial organization, and among them were Arthur E. Andersen, Eric A. Camman, Frederick H. Hurdman, William M. Lybrand of Coopers & Lybrand, Robert Hiester Montgomery, C. Oliver Wellington, and John Raymond Wildman.

Cost accounting, as a vital factor of successful business administration, has, in the last few years, been brought home in various ways to many manufacturers who before had never seriously appreciated its importance.The Federal Trade Commission, working for more stable conditions, has conducted a widespread campaign of education, explaining in detail what a cost accounting system is, how it is operated, and the resulting business advantages.Various manufacturers' associations have first paid skilled accountants to devise cost-finding methods suited to their special trade conditions, and then have instituted a vigorous propaganda to induce all engaged in their own particular industry to adopt them, thus making these methods uniform in the trade and securing uniformity of selling prices and the end of reckless and ignorant price-cutting.Now the government, with its need to levy war taxes and its consequent necessity for searching investigation into income and excess profits, requires that estimates and approximations as to production costs and profits shall give place to rational accounting systems giving actual figures by uniform methods.

In this way the modem cost system builds up an interlocking series of accounts which furnish the material for a detailed study of the operations of a manufacturing business.

This object would be attained, even if the uniform system were not as scientific as it should be; for if errors were made through the method established, all manufacturers would at least be figuring the same way, all would be making the same mistakes, and unfair and ignorant competition would be eliminated.

[50] This type of visual analytics was presented earlier by Church (1901),[51] and became more common in introductory textbooks; see for example Webner (1911),[52] Kimball (1914),[53] Larson (1916),[54] and Newlove (1923).

Last part of the system presented are the scheme's concerning the controlling the cost records:[71] Diagram XIII summarizes the discussion of the factory ledger accounts.

The reader is given a bird's eye view of the problems dealt with, and is then shown in detail the development of cost and controlling records from the various business and factory forms.

[11] A second 1919 review by Arthur R. Burnet in the Publications of the American Statistical Association called the entire work a happy combination of theory and practical examples.

The chapter on the examination of the plant preparatory to the installation of a cost system, according to Burnet in those days, contained a valuable checking list which should furnish statisticians with a wealth of suggestions for the analysis of business.

For while the major part of Mr. Nicholson's counsels on the varied phases of commercial activity have reference to the more extensive industries, they are applicable to every kind of business which is called into existence for profit making...[76] Hein (1959) further evaluated, that "modern writers on management theory and practice would have to examine it closely to find points not now being advocated in the current literature.

Hein (1959) summarized: For instance, [Nicholson] proposed a summary of requisitions as an aid in posting to stores ledgers and cost records.

He did not originate this idea, but brought it to a high stage of perfection, designing raw materials ledger cards which had spaces not only for amounts and values, but also for items received and requisitioned, with the balance on hand indicated.

"[1] He explained: [Nicholson's] experiences as head of a management consulting firm focused his attention on the relationship between cost accounting and industrial efficiency.